Personal Finance
Record breaking summer heat waves prompt higher home cooling costs
Visitors walk during a long-duration heat wave impacting much of California on July 9 in Death Valley National Park, California.
Mario Tama | Getty Images News | Getty Images
Amid surging summer heat, the earth reached a new hottest day on record on July 22.
That day, the global average temperature was almost 63 degrees Fahrenheit, and was surrounded by similar high temperature days.
Across the U.S. this summer, many areas have experienced unrelenting heat waves.
As a result, many Americans face a tough tradeoff between paying higher cooling costs or suffering in the heat to save money, research finds.
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This year, extreme heat is projected to lead home cooling to cost an average of $719 from June through September — up nearly 8% from $661 for the same period in 2023 — the National Energy Assistance Directors Association and the Center for Energy, Poverty and Climate estimate.
Home cooling costs have risen in the past decade as higher temperatures require more electricity.
And those higher temperatures are expected to get worse, with the U.S. by the end of the century projected to have at least 50 days per year with maximum temperatures above 95 degrees, according to new research from the JPMorgan Chase Institute.
“We’re seeing more and more high heat days and the impact of climate change,” said Heather Higginbottom, head of research, policy and insights for corporate responsibility at JPMorgan Chase. “That’s another expense that families and households have to manage.”
Some must ‘just go without cooling their homes’
Low-income households may be poised to suffer most amid rising temperatures.
During hot days, low-income households tend to go without cooling to save money. They spend 37% to 45% less on air conditioning than high-income households, JPMorgan Chase Institute found, based on an analysis of anonymized firm data.
A man walks near the Las Vegas strip during a heatwave in Las Vegas on July 7.
Robyn Beck | Afp | Getty Images
For most households, the higher electricity bills have limited effects on other spending. In Houston, an extra 95-degree day contributes to less than $1 in foregone spending for the average family, according to the JPMorgan Chase Institute’s research.
In two other cities the research evaluated — Los Angeles and Chicago — there was no statistically detectable effect.
“Lower-income households will spend less on air conditioning than middle- or higher-income households on high heat days, and essentially just go without cooling their homes as effectively for financial reasons,” Higginbottom said.
Rising energy prices have a greater impact on lower-income families because those increases take up a larger share of their budgets, according to Mark Wolfe, executive director of the National Energy Assistance Directors Association.
For a high-income family, higher energy bills may push those costs from 3% to 3.1% of their budgets, a difference that likely won’t substantially impact their lives, Wolfe said.
But for low-income families, the share of those costs in their budgets may go from 8.3% to 11%, and substantially limit their discretionary income, he said.
Those low-income families tend to disproportionately include young children, elderly or disabled individuals, which means higher heat also poses a significant health risk, Wolfe said.
‘There’s no inexpensive solution’
While policies can help those vulnerable populations, it is a race against time, as temperatures rise faster than expected, he said.
“We’re having extended periods of very high temperatures, and we’re not prepared for it,” Wolfe said.
Two policy approaches can help, according to Wolfe — immediate help for people pay their cooling bills and long-term efforts to retrofit housing for low-income families so they can access affordable and modern cooling systems.
In the meantime, many families may be at risk of shut offs if they can’t pay their bills.
Turning up the temperature on the thermostat — say from 72 degrees to 78 degrees — can help reduce cooling costs. Installing more insulation can also result in savings, according to experts.
But this summer is a “wake up call” that bigger changes need to happen, Wolfe said.
“This is going to be expensive to adapt,” Wolfe said. “There’s no inexpensive solution.”
Sdi Productions | E+ | Getty Images
The U.S. job market has undergone a dramatic transformation in recent years, from one characterized by record levels of employee turnover to one in which there is little churn.
In short, the “great resignation” of 2021 and 2022 has morphed into what some labor economists call the “great stay,” a job market with low levels of hiring, quits and layoffs.
“The turbulence of the pandemic-era labor market is increasingly in the rearview mirror,” said Julia Pollak, chief economist at ZipRecruiter.
How the job market has changed
Employers clamored to hire as the U.S. economy reopened from its Covid-fueled lull. Job openings rose to historic levels, unemployment fell to its lowest point since the late 1960s and wages grew at their fastest pace in decades as businesses competed for talent.
More than 50 million workers quit their jobs in 2022, breaking a record set just the year prior, attracted by better and ample job opportunities elsewhere.
The labor market has gradually cooled, however.
The quits rate is “below what it was prior to the start of the pandemic, after reaching a feverish peak in 2022,” said Allison Shrivastava, an economist at job site Indeed.
Hiring has slowed to its lowest rate since 2013, excluding the early days of the pandemic. Yet, layoffs are still low by historical standards.
This dynamic — more people stay in their jobs amid low layoffs and unemployment — “point to employers holding on to their workforce along with more employees staying in their current jobs,” Shrivastava said.
Big causes for the great stay
Employer “scarring” is a primary driver of the so-called great stay, ZipRecruiter’s Pollak said.
Businesses are loath to lay off workers now after struggling to hire and retain workers just a few years ago.
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But job openings have declined, reducing the number of quits, which is a barometer of worker confidence in being able to find a new gig. This dynamic is largely due to another factor: the U.S. Federal Reserve’s campaign between early 2022 and mid-2023 to raise interest rates to tame high inflation, Pollak said.
It became more expensive to borrow, leading businesses to pull back on expansion and new ventures, and in turn, reduce hiring, she said. The Fed started cutting interest rates in September, but signaled after its latest rate cut on Wednesday that it would move slower to reduce rates than previously forecast.
Overall, dynamics suggest a “stabilizing labor market, though one still shaped by the lessons of recent shocks,” said Indeed’s Shrivastava.
The great stay means Americans with a job have “unprecedented job security,” Pollak said.
But those looking for a job — including new college graduates and workers dissatisfied with their current role — will likely have a tough time finding a gig, Pollak said. She recommends they widen their search and perhaps try to learn new skills.
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